How Do Copayment Coupons Affect Branded Drug Prices and Quantities Purchased?

We estimate the causal effects of drug copayment coupons, which reduce consumer cost sharing for branded prescription drugs, on net-of-rebate price and quantities sold. We show that coupon introductions increase the quantity of drugs without generic substitutes sold by 23–25 percent for the commercial segment relative to Medicare Advantage, where coupons are banned. To quantify the resulting equilibrium price effects, we estimate a discrete choice model of demand for multiple sclerosis drugs and simulate a model of drug price negotiations. We estimate that net-of-rebate prices are 8 percent higher due to coupons being offered for most of these drugs.